Topline
Shares of Carnival Corp., one of the world’s largest cruise liners, collapsed to a three-decade low on Friday after the company reported worse-than-expected earnings—disappointing investors despite its cash flow turning positive for the first time since it resumed cruise operations during the pandemic.
Morgan Staley has warned shares of the debt-loaded cruise liner could plunge to $0 in a worst-case … [+] scenario. Anadolu Agency via Getty Images
Key Facts
Carnival stock collapsed more than 20% Friday to $7.02 by 10:10 a.m. ET—hitting its lowest level since 1992 after the company reported a net loss of $770 million for the third quarter and revenue of $4.3 billion—far less than the $4.9 billion analysts were expecting. The shortfall came even as the company reported its cash flow (as measured by Ebitda) turned positive for the first time since the resumption of cruise operations—hitting roughly $300 million but still less than half of expectations calling for $730 million. In a statement, CEO Josh Weinstein said the company has seen “meaningful improvement” in booking volumes that are “now running considerably ahead of strong 2019 levels” since announcing relaxed protocols last month, but the company expects cash flow will be flat or could even fall slightly in the fourth quarter, significantly worse than expectations of $600 million. Shares of the cruise liner, which loaded up on debt to remain afloat during the pandemic, have collapsed 66% this year—nearly tripling the 24% decline of the S&P 500. Rival cruise stocks also took a hit after the release: Royal Caribbean fell 10% to less than $40 (it’s down 51% this year), while Norwegian Cruise Line tanked 13% (now down 46% this year).
Key Background
The cruise industry was among the first to be hit by the coronavirus pandemic, and it’s been reeling ever since. The Centers for Disease Control and Prevention issued a no-sail order for the industry in March 2020 that lasted until July. Carnival’s stock rallied after the company posted strong earnings earlier this summer, but the upturn was short lived as analysts started slashing their price targets in light of surging inflation and higher fuel price. Among the most bearish, Morgan Stanley warned that in a worst-case scenario, Carnival’s stock could fall to $0 per share if the economy falls into a recession and the company experiences another “demand shock” akin to the Covid-19 pandemic.
Tangent
Carnival raised nearly $1.2 billion in a stock offering last quarter, in part to help pay its massive debt load of over $34 billion.
Further Reading
Carnival Shares Plunge Nearly 15% As Morgan Stanley Warns Of Potential Stock Wipeout (Forbes)
Cruise Stocks Sink After Carnival Announces $1 Billion Share Sale (Forbes)
Carnival Stock Plunges 20% To 30-Year Low After Worse Than Expected Loss
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